The railway companies Canadian Pacific Railway Limited (CP) and Kansas City Southern (KCS) have entered into a merger agreement, under which CP will acquire KCS, creating the first single-line rail network to encompass the United States (US), Mexico and Canada.
The acquisition will be in a stock and cash transaction, representing an enterprise value of approximately US$31 billion, including the assumption of US$3.8 billion of outstanding KCS debt.
The combined entity will be named Canadian Pacific Kansas City (CPKC) and will offer new options for customers, economic growth as well as competition boost in Northern America, and estimated annualised synergies of approximately US$1 billion within three years, according to a statement.
"By combining, we will unlock the full potential of our networks and our people while providing industry-best service for our customers," claimed Keith Creel who will serve as the Chief Executive Officer of the new company.
Furthermore, the combination creates the first US-Mexico-Canada rail network with new single-line offerings that will deliver expanded market reach for CP and KCS customers, provide new competitive transportation options, and support North American economic growth, according to Creel.
In addition, the President and Chief Executive Officer of KCS, Patrick J. Ottensmeyer noted that the CP-KCS combination will not only benefit customers, labour partners, and shareholders through new, single-line transportation services, attractive synergies and complementary routes, it will also benefit KCS and its employees by enabling them to become part of a growing North American continental enterprise.
While remaining the smallest of six US Class 1 railroads by revenue, the combined company would have a much larger and more competitive network, operating approximately 20,000 miles of rail, employing close to 20,000 people, and generating total revenues of approximately US$8.7 billion based on 2020 actual revenues.
The Canadian town of Calgary will be the global headquarters of CPKC and Kansas City, Missouri, will be the headquarters for the US. Furthermore, the Mexico headquarters will be in Mexico City and Monterrey, while CP’s current US headquarters in Minneapolis - St. Paul will remain an important base of operations. Additionally, CP’s expanded Board will be joined by four KCS Directors.